Company Update (NYSE:RIG): Transocean LTD Reaches Settlement Agreements With PSC And BP

Transocean LTD (NYSE:RIG) announced that it has reached two separate settlement agreements, with the Plaintiffs’ Steering Committee (the “PSC”) and with BP Exploration & Production Inc. and BP America Production Co. (“BP”). These settlements together resolve substantially all outstanding claims against Transocean arising from the April 20, 2010, Macondo Well incident involving the Deepwater Horizon in the Gulf of Mexico.

Under the terms of the agreement with the PSC, which is subject to approval by the U.S. District Court for the Eastern District of Louisiana (the “Court”), Transocean will pay two classes of plaintiffs, represented by the PSC, a total of  approximately $212 million. Transocean will also pay attorneys’ fees to be determined by the Court. The first class covered under the PSC agreement comprises private plaintiffs and local governments that potentially could assert punitive damages claims against Transocean under maritime law. The second class comprises the private plaintiffs who previously settled economic damages claims with BP and were assigned certain claims BP had made against Transocean. A court-appointed special master will allocate Transocean’s payment between the punitive damages class and the economic damages class. Transocean intends to satisfy its payment obligations using cash on hand.

Under the terms of the agreement with BP, which is not subject to court approval, BP has agreed to indemnify Transocean for compensatory damages, including natural resource damages, while Transocean will indemnify BP for personal and bodily injury claims of Transocean employees and claims relating to any future cleanup or removal of diesel or other pollutants stored on the Deepwater Horizon. BP and Transocean will mutually release all claims each has against the other. BP will also discontinue its attempts to recover as an “additional insured” under Transocean’s liability policies that will accelerate the company’s recovery of approximately $538 million in insurance proceeds. Finally, BP will pay Transocean $125 million in compensation for legal fees it incurred.

The Macondo Well incident resulted from a complex series of causes and events. These included mistakes made by multiple parties, including Transocean, from which the entire industry can learn and continue to improve safety in the drilling industry. These important agreements, which Transocean believes to be in the best interest of its shareholders and employees, remove substantially all of the remaining uncertainty associated with the incident.

“These settlements provide substantial closure to five years of litigation and we are confident that this agreement can be a significant step forward in our efforts to renew our partnership with BP,” said Jeremy Thigpen, President and Chief Executive Officer of Transocean. “Most importantly, while the litigation is finally coming to an end, it is important that we, as an industry, continue to remember the eleven men who lost their lives in this tragedy, and keep them and their families in our thoughts and prayers.” (Original Source)

Shares of Transocean LTD closed today at $19.28, up $0.31 or 1.63%. RIG has a 1-year high of $46.12 and a 1-year low of $13.28. The stock’s 50-day moving average is $17.85 and its 200-day moving average is $18.30.

On the ratings front, Transocean LTD has been the subject of a number of recent research reports. In a report released yesterday, Credit Suisse analyst Gregory Lewis maintained a Sell rating on RIG, with a price target of $12, which reflects a potential downside of 37.7% from last closing price. Separately, on May 13, Canaccord Genuity’s Alex Brooks also reiterated a Sell rating on the stock and has a price target of $10.

According to, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Gregory Lewis and Alex Brooks have a total average return of -11.6% and -4.6% respectively. Lewis has a success rate of 40.0% and is ranked #3505 out of 3606 analysts, while Brooks has a success rate of 33.3% and is ranked #2968.

The street is mostly Bearish on RIG stock. Out of 8 analysts who cover the stock, 6 suggest a Sell rating , one suggest a Buy and one recommend to Hold the stock. The 12-month average price target assigned to the stock is $13.58, which reflects a potential downside of -29.5% from last closing price.

Transocean Ltd is an international provider of offshore contract drilling services for oil and gas wells. The Company has two operating segments; contract drilling services and drilling management services.

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